SFE and Standard Life team up to improve vulnerable customers' experience of financial services

Scottish Financial Enterprise and Standard Life have teamed up to address the increasingly topical issue of customer vulnerability in a bid to significantly boost financial wellbeing and inclusion.

The trade body and the life and pensions firm have published the report titled “Evolving our response to the needs of vulnerable customers” in a bid to drive co-ordinated action on customer vulnerability across Scotland’s financial services industry.

They are encouraging an industry response to high levels of customer vulnerability amid continuing financial pressure on households, saying “stubbornly” high inflation and elevated interest rates are causing hardship across Scotland and the rest of the UK.

The report is calling for a sector-wide charter for vulnerable customers to be established, and also recommends that firms to go beyond the new regulatory minimum requirements to ensure customers receive the “best service and care possible” introduced by the Financial Conduct Authority (FCA) through the Consumer Duty.

Standard Life found that 59 per cent of people polled worry about spending too much now, in case they run out of money. Picture: Getty Images/iStockphoto.

The latter became effective in July, setting higher and clearer standards of consumer protection across financial services, and requiring firms to put their customers’ needs first. “Our rules require firms to consider the needs, characteristics and objectives of their customers – including those with characteristics of vulnerability – and how they behave, at every stage of the customer journey,” the watchdog states.

Now, SFE and Standard Life say its proposals will be delivered through a new Customer Working Group, which will be tasked with sharing and enabling best practice in areas like use of technology, staff training, and driving innovation to make products and services more accessible. “By targeting these areas, the industry hopes to respond more rapidly to needs of vulnerable customers, improving financial wellbeing and inclusion,” say the two organisations.

The report was written in response to their recent Vulnerable Customers Summit, which brought together experts and leaders from organisations across financial services, data, and the third sector to develop a collaborative industry-wide approach to supporting this demographic.

SFE and Standard Life also emphasise that the past few years have seen UK financial services firms encounter “unprecedented levels of customer vulnerability, with the current cost-of-living pressures immediately following the emotional and, for many, financial impacts of the pandemic”. The historic Scottish financial firm, now part of Phoenix Group, recently uncovered that only 41 per cent of people surveyed feel positive about their financial situation, and just 61 per cent feel confident making financial decisions. What's more, 59 per cent worry about spending too much now, in case they run out of money.

SFE CEO Sandy Begbie says: 'Now, more than ever, it is absolutely essential that Scotland’s financial services industry play its part in supporting customers who are struggling.' Picture: contributed.

Other canaries in the household budget coalmine include Citizens Advice Scotland (CAS) last month revealing the “startling” finding that more than 1.3 million people in Scotland are struggling on their present income.

And earlier this month, the Scottish Association for Mental Health warned of a “critical” need to invest in mental health and support services, saying the pressures imposed by inflation and the cost-of-living crisis are causing major distress and anxiety among people with financial problems.

Now, Sandy Begbie, chief executive of SFE, says: “Now, more than ever, it is absolutely essential that Scotland’s financial services industry play its part in supporting customers who are struggling. We’ve seen how the cost-of-living crisis has compounded many of the challenges built up during the pandemic, with increased financial pressures hitting the most vulnerable the hardest.”

Riffat Tufail, head of customer vulnerability at Standard Life UK, also comments: “We were delighted to host the summit and bring together SFE members to have some inspiring conversations about how we collaborate, and continue to raise the bar for all our customers. We know that people don’t always disclose vulnerabilities to firms, and, as an industry, we want to encourage them to do so. Knowing more about our customer’s individual needs is the first step to providing the support that’s right for them.”

Riffat Tufail, head of customer vulnerability at Standard Life UK, states: 'Knowing more about our customer’s individual needs is the first step to providing the support that’s right for them.' Picture: Tina Norris.

There is also evidence that more appropriate treatment of the vulnerable can benefit the bottom line of finance firms. For example, The Inclusion Foundation, which calls itself a movement for social good that is bringing the financial services industry together to tackle financial exclusion, believes inclusive services could unlock £500 million for institutions.

And consultancy Newton Europe in May of this year unveiled research showing how many vulnerable customers, particularly the neurodiverse, were getting poor outcomes from their financial services providers. It published the findings in its report titled The Vulnerability Void, a term referring to the “chasm of poor outcomes that vulnerable customers are more likely to fall into; being under-banked, under-insured, and over-exposed to financial risk including debt”.

The firm found that such poor outcomes are attached to about £41 billion in vulnerable customers’ money, but it also found that poor digital journeys lost providers around £34.6m in revenue over 12 months due to, for example, potential clients abandoning attempts to sign up for a financial product, and going to another financial company.

The involvement in the latest initiative by SFE, whose members include Abrdn, Baillie Gifford, Bank of Scotland, Barclays, Blackrock, Phoenix Group, Morgan Stanley and Royal London, plus smaller financial players, comes after it earlier this month launched a major campaign to attract international investment to Scotland’s £14bn finance sector. Earlier in the year, it debuted another to encourage young Scots into financial services.

Now, with protecting the vulnerable very much in its sights, its CEO Sandy Begbie says in that regard: “The industry is moving in the right direction – but we know we can and must do more.”